Markets and structures

Transform and grow

David.Leitch@itkservices.com.au

Acknowledgment to futures generations

Questions

Will the CIS work?

What does it take to be a long term player?

Is Neoen Australia outgrowing NEOEN?

Would NEOEN be better structured as a trust in Australia?

Projects are getting bigger

Approved wind farms. Source: Renewmap.com.au

Still plenty of wind developers, even only counting approved

Developoers with approved wind. Source: Renewmap

And even more with solar

Solar Developers with approved projects. Source:Renew map

VRE under development. Source: Renewmap

Capacity Investment Scheme

CIS timetable. Source: Dept, ITK

Where to build - System design perspective

1 REZ weights for highest Sharpe Ratio portfolio

2 REZ weights for lowest cost portfolio including transmission and firming

3 REZ weights for ITK preferred (lowest cost subject to Sharpe Ratio of 4)

Results

Source:ITK

Average day

ITK preferred

“Costs”

Source: ITK

Transmission_build

Transmission costs

Transmission cost. Source:various

Thermal v renewables. Source: NEM Review

7GW under construction

Source: Renewmap.com.au

+ CIS

75% by 2030 Source:ITK

Lots of batteries under construction

Under construcion. Source:Renewmap, AEMO

challenges for a listed renewable developer

  • infrastructure owner wants a steady predictable return
  • capital commitments are large and ongoing
  • developer wants a higher because riskier return on capital
  • lower capital requirement higher people skills

Company

  • Return on capital never obvious
  • So yield is the signal to investors but needs to be pre tax
  • constant issue of capital dilutes control
  • Trust and developer or stapled security

Trust

  • distributes cash, doesn’t worry about profit for distribution
  • pre tax basis
  • Trust managed by holding company
    • develops and sells into trust
  • Stapled security
    • trust and holding company indivisibly stapled together

Examples

Property trusts, Transurban, Spark Infrastructure, Ausnet